Written by: Thejaswini MA
Translated by: AididiaoJP, Foresight News
Does this create real value, or is it merely speculation dressed in the guise of regulatory approval?
January 2024 feels like it was a lifetime ago. Although it has only been 18 months, it feels like a century has passed. For cryptocurrency, this period has been nothing short of an epic journey.
On January 11, 2024, spot Bitcoin ETFs will land on Wall Street. About six months later, on July 23, Ethereum ETFs will also take the stage. Now, the U.S. Securities and Exchange Commission (SEC) is inundated with 72 cryptocurrency ETF applications, and the number continues to grow.
From Solana to Dogecoin, from XRP to Pudgy Penguins, asset management companies are packaging various digital assets into compliant financial products. Bloomberg analysts Eric Balchunas and James Seyffart have raised the probability of approval for the applications to 'over 90%,' signaling that we will witness the largest scale expansion of crypto investment products in history.
If 2024 is the year of struggle for survival, then 2025 is the harvest time for the fierce competition among contenders.
Bitcoin Guardian Security
These two words were originally unrelated, but Meanwhile has completely rewritten the script.
Through Meanwhile, users pay premiums in Bitcoin, and subsequently can borrow against their staked assets without selling. There is no tax burden, no selling pressure, and no awkward situations.
The core advantages are as follows:
Lock in BTC position immediately
After the price of coins skyrockets
Staking loans to avoid capital gains tax
Security and income both secured
It's like holding Bitcoin while also receiving benefits.
The $107 billion feast of Bitcoin ETFs
To understand the significance of altcoin ETFs, one must first recognize how Bitcoin spot ETFs have overturned everyone's expectations and rewritten the rules of the asset management industry.
In just one year, Bitcoin ETFs attracted $107 billion, becoming the most successful ETF debut in history, and 18 months later, its assets under management have reached $133 billion.
BlackRock's IBIT alone holds 694,400 Bitcoin, valued at over $74 billion. All Bitcoin ETFs combined control 1.23 million Bitcoin, accounting for about 6.2% of the circulating total.
As BlackRock's Bitcoin ETF quickly surpassed $70 billion in size, it proved that the demand for crypto exposure through traditional investment tools is real, large-scale, and far from saturated. Institutions and retail investors alike are lining up to enter.
This success has created a virtuous cycle: ETF accumulation leads to a decrease in Bitcoin balances on exchanges, accelerating institutional holdings, enhancing Bitcoin price stability, and granting the entire crypto market unprecedented compliance. Even amidst market volatility, institutional funds continue to flow in. These are not day traders or retail speculators, but pension funds, family offices, and sovereign wealth funds that view Bitcoin as a legitimate asset class.
It is this success that has led to approximately 72 cryptocurrency ETF applications piling up at the SEC as of April.
What is the value of ETFs?
Since altcoins can be purchased directly on exchanges, what is the use of ETFs? This precisely reflects the market logic surrounding mainstream acceptance. ETFs are a milestone for cryptocurrency.
It grants digital assets the legitimacy to trade on traditional stock exchanges, allowing investors to buy and sell crypto assets through regular securities accounts. For most everyday investors who are not familiar with crypto technology, this is a lifesaver. There is no need to set up wallets, manage private keys, or deal with the technical details of the blockchain. Even if the wallet barrier is overcome, risks such as hacking, private key loss, and exchange failures are still present. ETFs represent a solution for investors, managing custody and security issues while providing highly liquid assets traded on mainstream exchanges.
The Gold Rush of Altcoins
The application list reveals the upcoming diversity of compliant crypto assets. Giants like VanEck, Grayscale, Bitwise, and Franklin Templeton have submitted Solana ETF applications, with a 90% approval probability. Nine firms, including newcomer Invesco Galaxy (planning to use the code QSOL), are competing for the SOL cake.
XRP follows closely, with multiple applications targeting this payment token. Cardano, Litecoin, and Avalanche ETFs are also under review.
Even meme coins have not been spared. Mainstream issuers have submitted applications for Dogecoin and PENGU ETFs. 'Surprisingly, no one has applied for a Fartcoin ETF,' Bloomberg's Eric Balchunas joked on the X platform.
Why is there such a concentrated explosion at this moment? This is the result of multiple factors resonating together. The pro-crypto policy of the Trump administration marked a regulatory shift, and the new SEC Chairman Paul Atkins abolished Gary Gensler's 'enforcement over regulation' approach, establishing a crypto working group to develop clear rules.
The regulatory thaw reaches its peak in the SEC's latest statement, where 'protocol staking activities' do not constitute securities issuance, completely changing the previous government's crackdown policy on staking service providers like Kraken and Coinbase.
Bitcoin and altcoins have gained institutional certification, along with the corporate crypto reserve craze and Bitwise's research showing that 56% of financial advisors are willing to allocate crypto assets, together driving the demand for diversified crypto exposure beyond Bitcoin and Ethereum.
Demand Verification
While Bitcoin ETFs have proven the authenticity of institutional demand, early analyses show that altcoin ETFs will face a completely different situation.
Katalin Tischhauser, head of research at Sygnum Bank, expects a total inflow of funds for altcoin ETFs to be around 'hundreds of millions to $1 billion,' which is less than the tip of Bitcoin's $107 billion scale.
Even the most optimistic estimates show that the total scale of altcoin ETFs is unlikely to reach even 1% of Bitcoin's. From a fundamental perspective, this difference is reasonable.
The comparison with Ethereum is even harsher. As the second-largest cryptocurrency, Ethereum ETFs attracted only about $4 billion in net inflows over 231 trading days, barely reaching 3% of Bitcoin's $133 billion scale. Despite a recent $1 billion inflow over 15 trading days, Ethereum's institutional appeal still lags far behind Bitcoin, indicating that altcoin ETFs will face a more severe battle for investor attention.
Bitcoin has won institutional favor due to its first-mover advantage, regulatory clarity, and the simple narrative of 'digital gold.' Now, 72 applications are competing for a market that may only accommodate a few winners.
Staking rewrites the rules of the game
One key factor that may differentiate altcoin ETFs from Bitcoin products is: generating income through staking. The SEC's allowance for staking opens new possibilities for ETFs, allowing staked holdings to distribute rewards to investors.
Currently, Ethereum staking annualized returns are about 2.5-2.7%. After deducting ETF fees and operating costs, investors may obtain a net yield of 1.9-2.2%. Although this may seem insignificant by traditional fixed-income standards, it is quite attractive when combined with potential price appreciation.
Solana staking also offers similar opportunities. This creates a new profit model for ETF issuers and provides new value for investors. ETFs with staking capabilities are no longer just price exposure tools but become revenue-generating assets that can produce passive income.
Multiple Solana ETF applications explicitly include staking terms, with issuers planning to stake 50-70% of their holdings while maintaining liquidity reserves. The Invesco Galaxy Solana ETF application document specifically mentions using 'trusted staking service providers' to generate additional income.
But staking also brings operational complexities. ETF managers managing staked crypto assets face multiple challenges: they must maintain enough non-staked assets to meet redemptions while maximizing the staking ratio to enhance returns; they also need to manage 'slashing' risks, losing funds when validators make mistakes or violate rules. Operating verification nodes requires specialized skills and reliable infrastructure. Therefore, successfully running a crypto ETF with staked assets is like walking a tightrope; it is not impossible, but extremely difficult.
Previously approved Bitcoin and Ethereum ETFs did not have this option, as the SEC under Gary Gensler believed that staking violated securities laws and constituted unregistered securities issuance.
Fee Wars
The 72 applications will inevitably trigger a fee war. As many products compete for limited institutional funds, price becomes a key differentiator. Traditional crypto ETF management fees range from 0.15% to 1.5%, but competition may push them even lower.
Some issuers may even subsidize management fees with staking income, launching zero or negative fee products to attract funds. The Canadian market has seen several Solana ETFs launched with limited-time no management fee clauses.
This compression of fees benefits investors but squeezes the profit margins of issuers. Only the largest and most efficient operators can survive. Mergers, exits, and transformations are expected, and the market will ultimately determine the winners.
Perspective
The altcoin ETF craze is changing the logic of crypto investment.
Bitcoin ETFs have achieved great success. Ethereum ETFs provided a second option, but due to complexity and poor returns, the response has been tepid. Now, asset management companies are betting on the strengths of different cryptocurrencies.
Solana emphasizes speed, XRP focuses on payment scenarios, Cardano boasts 'academic rigor,' and even Dogecoin is telling the mainstream acceptance story. This is meaningful for building a portfolio. Cryptocurrency is no longer an alternative asset class but has diversified into dozens of investment targets with varying risk characteristics and use cases.
As the largest cryptocurrency by market capitalization, Bitcoin has become an extension of many stock market investors' traditional portfolios, providing risk diversification and serving as a hedge against market uncertainty. In contrast, Ethereum, while ranked second, has not achieved the same level of mainstream integration; most retail and institutional investors do not consider Ethereum ETFs as core allocations.
Altcoin ETFs must provide differentiated value to avoid repeating the fate of Ethereum ETFs.
But this also reflects the crypto industry drifting further from its original intent. When even meme coins have ETF applications, when 72 products are vying for attention, and when fee compression resembles a commodity business, the industry has become thoroughly mainstream.
The question is: does this create real value, or is it merely speculation dressed in the guise of regulatory approval? The answer may depend on perspective. Asset management companies see a new source of income in a crowded market, while investors gain easy access to crypto exposure through familiar products.
The market will inevitably render its judgment.
